Eric Bahn (co-founder of Hustle Fund VC) used to be obsessed with a book called The Purple Cow by Seth Godin.

The main takeaway from the book:

Don’t worry about marketing and distribution. Just build a product that naturally goes viral.

But over the years, Eric realized that this is actually bad advice.

Teams can’t assume their product will go viral or sustain its virality.

Instead of hoping for viral growth, Eric realized that it’s more effective to focus on distribution just as much as your product.

In our 2nd episode of Uncapped Notes, Eric and Janel explain:

1. what it means to validate your market and
2. why you need to obsess over distribution.
   

Distribution > Product

Justin Kan was one of the co-founders of Twitch, a streaming company that was acquired by Amazon for nearly a billion dollars.

Four years ago, he wrote a tweet that resonated with Eric to this day.

First time founders often make the mistake of being only product-oriented.

But to Justin’s point, second-time founders realize their mistake. They are as obsessed about marketing and distribution as they are about building a great product… because they know that without distribution, you have no customers.

Eric likes to back founders who are excited about…

1. Marketing
2. Distribution channels
3. Customer acquisition
4. Sustained growth

And maybe even more so than the product they are building.

But what does a VC look for to see if founders have distribution nailed?

The 2nd-time-founder mindset

For more mature companies who have a Series B, the evidence is clear. Venture capitalists can see if a business has a team dedicated to demand generation, performance marketing, ROAs, CPA, and more.

For early stage companies, it’s less clear whether or not the founders have the right attitude when it comes to distribution.

But there are two things that stand out:

1. Early evidence of traction
2. Strong hypothesis on your marketing channels

You can accomplish both of these if you can successfully sell before you build.

For example, founders of SaaS businesses can with prospective buyers to line up letters of intent or even signed contracts before they’ve built a product.

This is exactly what Eric did when he wanted to create a SaaS product for his education tech company years ago.

He met with his target customer and shared what the product would look like, along with all the mockups in place.

Eric told them that he would work with six clients right now. But each of them would need to pay him $80k upfront to hold their seat with the promise that he would deliver this product to them in 6 months.

It was a bold move but his strategy worked.

Six clients paid him $80k each. Eric and his team built an amazing product for them. This gave them all the validation (and success) they needed to know the company was on the right track.

Explore different distribution channels and get traction as early as possible. It’s better to validate market demand and build the right product instead of building something that no one needs.

One last piece of advice

There is a lot of volatility in the market right now (today is July 21, 2022).

It’s not as easy to raise money from VCs as it once was. So you can’t just have a fascinating idea and product anymore.

You need to show validation when it comes to distribution.

You need a strong thesis on what channels you want to test and why.

And the icing on the cake? Secure signed contracts, letters of intent, or even some revenue to show market demand is there.

Show the VCs and investors: “We have market demand. I just need to execute. All I need is a little capital to get going.”